Are you looking to refinance before the end of the year? The latest frenzy of mortgage refinancings has benefited millions of Americans who have been responsible or lucky enough to qualify for 30-year fixed-rate home loans below 4 percent; equating to a tax effective rate that could be as low as 2.6 percent.
But don’t jump to the first offer on the table. In many instances you could have done much better shopping for the best rate instead of grabbing the first refi rate pitched.
Quoted rates can vary by more than a percentage point for the same customer seeking a 30-year fixed loan. The online mortgage shopping service provides information about potential borrowers to lenders who then can bid for the business. Bankrate.com is one online site that can provided cost and rate comparisons.
A consumer with a credit score of 759 and a loan amount of $260,000, for example, might have received quotes from lenders in early August ranging from 3.25 percent to 4.625 percent. By choosing the lowest rate, the borrower would save $214 a month, $2,568 a year and nearly $74,000 over the life of the loan.
Yet a recent Harris Interactive survey of 1,380 homeowners, found that 9 in 10 American adults compared prices when shopping for big purchases. But fewer than half of homeowners shopped around to refinance their current mortgages.
Some borrowers complain of being bombarded with high-pressure pitches for nothing-special rates or loan products that they didn’t ask for and don’t want. You as the Borrower should consider consulting a mortgage broker who has access to multiple lenders, perhaps consulting the National Association of Mortgage Brokers to find a certified professional. Brad and I have several referrals for which we can recommend.
Lending standards remain tight and pose challenges for all but the most rock-solid borrowers, don’t rule out small local banks, some of which are eager to make mortgage loans. They may get to know you and your local market better, so you’re not just a number and a credit score. You may fit the profile for which they are seeking.
What customers leave on the table enhances the profits of lenders, who have enjoyed soaring revenue and profits since the typical 30-year fixed mortgage rate dipped below 4 percent last fall and then trended downward to the 3.5 percent range this summer. What is remarkable about the loans is not only their huge numbers but also their profitability for the banks.
Mortgage Bankers Association figures show lenders, awash in refinance applications, have been making extra money by keeping the rates relatively high compared to their cost of funds. That makes the loans more profitable when they are sold — as nearly all 30-year mortgages are — to Fannie Mae, Freddie Mac or other buyers in the secondary markets.
Bottom line…do a little homework and you may be able to stash even more money in your pocket that you thought possible. Remember Christmas and holiday expenses are less than 11 weeks away!